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Concerns over PTA tax relief

The FSA’s move to launch a consultation paper on pension term assurance tax relief has been praised by a Money Marketing round-table protectionpanel but there are misgivings over how far-reaching any regulatory changes could be.

Scottish Widows market director (protection) Nick Kirwan warned of over-regulation as he understands that the FSA may be looking at “Icob-plus” rules, adding an extra layer of requirements for advisers wanting to sell PTA.

But Lifesearch managing director Tom Baigrie welcomed extra moves from the regulator to strengthen advice in this area, commenting that without extra supervision, there will be massive potential for the plans to be sold incorrectly and be misunderstood.

Baigrie and Bright Grey products director Roger Edwards also warned that while a minority of clients would benefit from pension term tax relief, there is a risk that it could encourage churning in many other cases.

Swiss Re technical manager Ron Wheatcroft said A-Day rules could encourage block-transfer of policies, which is “fraught with dangers”.

Kirwan says: “If the FSA is looking at Icob-plus, this could be the edge of the wedge.”

Edwards says: “I wonder if the Government has done its sums here and whether there will be a turn-round of some sort down the line. Consumers need life cover but even more so they need income protection. If we start to sell protection on the back of tax relief, we may not be looking at real customer needs.”

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